US manufacturing activity shrank in September for the first time in eight months in a sign that economic growth may be weakening, an influential survey has suggested.

"After a strong first quarter, the manufacturing sector has softened significantly," said Norbert Ore, who oversees the Institute for Supply Management survey.

"Stagnant and sluggish are apt descriptions for manufacturing at this time."

The ISM's manufacturing index, based on a questionnaire to purchasing managers, dropped into negative territory in September, falling to 49.5 points from 50.5 in August.

A figure below 50 indicates contraction.

However, Mr Ore added that much of the September data was mixed, making it difficult to pick out economic trends.

'Jobless recovery'

US manufacturing bosses were worried about the prospect of a war with Iraq and rising oil prices, the ISM found.

Prices for other raw materials also rose slightly in September.

New orders were stagnant compared to August, while existing stock piles of goods shrank.

"It means that business people are just very cautious about the economic outlook," said Sal Guatieri, an economist at the Bank of Montreal in Chicago.

"They are a bit sceptical that the strength of demand will hold up in the coming months and because of that they are pulling back production and trying to meet demand from inventories."

He warned of a "jobless recovery".

The new orders index rose to 50.2 points in September from 49.7 the previous month.

The ISM said the manufacturing sector, which makes up one sixth of the US economy, has "softened significantly".

Economists agreed. The ISM's report was "signalling a significant slowdown in growth" during the final three months of 2002, said analysts at SG Economics.

However, they pointed out that growth had been better than expected during July, August and September.